28 February 2013

Manpower main cost concern in 2013

Survey also shows SMEs expect to see cost of operations increasing this yearTight squeeze: Report says 88.4% of SMEs expect manpower to be their greatest worry. SMEs are looking towards Budget 2013 for incentives to recruit and develop local talent, increase productivity as well as internationalise with a one-stop centre in Iskandar Malaysia. - ST FILE PHOTO

To cope with escalating costs, SMEs are looking to set up shop outside S'pore.

NINE out of 10 small and medium-sized enterprises (SMEs) in Singapore foresee manpower to be the main cause of cost increases in 2013, as nearly a similar proportion of firms here reported an increase in their cost of operations last year and expect this to continue in the next 12 months.

To counter these concerns, Singapore SMEs are looking towards Budget 2013 for incentives to recruit and develop local talent, increase productivity as well as internationalise with a one-stop centre in Iskandar Malaysia.

According to the SME Business and Budget 2013 Sentiments survey report, released by the Association of Small and Medium Enterprises (ASME) yesterday, 88.4 per cent of SMEs expect manpower to be their greatest worry and main cause of cost increase for year 2013.

The report, which came together with ASME's recommendations for Budget 2013, showed that 87.9 per cent of SMEs reported an increase in current cost of operations for year 2012. Most of them attributed this increase to manpower, followed by rental and foreign worker levy. Going forward, 87.7 per cent of SMEs expect and will continue to see their cost of operations increasing in 2013.

Chan Chong Beng, president of ASME, said:"68.8 per cent of SMEs are hoping that Budget 2013 would have more incentives to help SMEs recruit local staff and talents. On our part, other than our ongoing efforts at bridging SMEs to talented pools of PMEs and students, we are also exploring other opportunities of bridging businesses to the alternative workforce."

This alternative workforce includes ex-offenders, undischarged bankrupts, back-to-work mothers and problem youths. ASME is looking at creating new jobs for them in SMEs.

To cope with escalating costs, SMEs here are also looking to set up shop outside Singapore as the report showed that 45.3 per cent indicate that their key strategy to deal with costs is to expand overseas. More than half of the SMEs though are looking to government assistance to venture abroad, with 57.8 per cent of them saying they would like to see more incentives in Budget 2013 for SMEs to expand overseas.

However, most of these companies are more likely to look within the region for opportunities as 65.8 per cent of SMEs are looking to expand or relocate to South-east Asian countries with Malaysia being the most popular choice.

To meet this demand, ASME plans to set-up a One-Stop Centre in Iskandar Malaysia to assist local SMEs who are want to relocate or expand, either partially or in its entirety, to the neighbouring economic zone. Still in its initial development stage, this initiative was conceptualised to dispel some of the concerns and doubts SMEs may have about expanding into Iskandar Malaysia, including security, legal, incentives, customs, infrastructure and administrative issues.

"The level of interest and enquiries on the Iskandar Development Region are rather high, but many SMEs are still apprehensive about the region. With a One-Stop Centre, ASME will source for properties, paying special attention to the quality of the development, amenities, legalities, infrastructure and security. The centre also seeks to provide SMEs with procedures to obtain business licences, manpower, and customs clearance," said Mr Chan.

Besides this, SMEs are also looking towards the upcoming national fiscal budget to help them in their productivity drive. As many as 53.6 per cent of SMEs would like to see more initiatives to increase productivity in Budget 2013 as some have also asked for the Productivity Innovation Credit (PIC) Scheme to be extended beyond 2015. ASME proposed increasing the cash payout component to 80 per cent from the current 60 per cent, for qualifying expenditure up to $200,000, instead of the current $100,000.

According to ASME, the recommendations for the PIC scheme are critical for SMEs to accelerate automation and productivity improvement in order to deal with the critical manpower shortage and cost escalation situation. The association believes such incentives will also benefit SMEs' cashflow and improve access to funding, especially so for micro SMEs.

Mr Chan said: "2013 will be an even more challenging year for SMEs if current challenges are not mitigated. In the short run, most SMEs will face greater impact on their profit margins and bottom line. The way forward would be to help SMEs speed up productivity improvements and assist SMEs to find alternative solutions to cope with the current unfavourable challenges and measures."

(The Business Times, 15 Jan 13)